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China, Panama Sign Pact On New Free Trade Zones

by Mary Swire,, Hong Kong

30 November 2017

China and Panama have signed an agreement to work together on the development of new free trade and economic cooperation zones, following the establishment of diplomatic relations between the two countries earlier this year.

The memorandum of understanding was signed by Chinese Minister of Commerce Zhong Shan and Panamanian Minister of Commerce and Industries Augusto Arosemena on November 17, 2017, during a state visit to China by Panamanian President Juan Carlos Varela Rodriguez.

In June 2017 Panama became the second Latin American country after Costa Rica to establish diplomatic relations with China, after breaking ties with Taiwan, and opened its first embassy in Beijing in September.

"With the establishment of the diplomatic relations between China and Panama... bilateral trade and economic cooperation has braced new development opportunities. The signing of the memorandum will help both sides expand the ways and channels for trade and economic cooperation and promote more investment cooperation projects," said the Chinese Ministry of Commerce in a statement on November 23.

Although no details were given as to the location or benefits of the proposed zones in the agreement, China has already demonstrated interest in Panama's existing free trade zones. In November a delegation of Chinese companies visited Panama's Colon Free Trade Zone with a view to establishing a presence in Panama, as reported by the Panama Bulletin. The second-largest free trade zone in the world, Colon is located at the Caribbean entrance to the Panama Canal, of which China is the second-biggest user worldwide.

Free trade zones offer a number of tax advantages that make them attractive to businesses. For example, according to Panama Offshore Services, the Colon Free Trade Zone imposes no import duties, zero tariffs and quotas on imports and exports to other countries, zero income tax, and a five percent tax on dividends.

TAGS: tax | investment | business | tariffs | China | dividends | trade | Panama | free trade zone

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